Senate Budget Committee Chairman Kent Conrad thinks so. The North Dakota Democrat made a big pitch for getting rid of many tax deductions and credits at a hearing on Wednesday, saying they’re contributing to a wide disparity in income between the wealthy and not-so-wealthy.

Sen. Kent Conrad (D., N.D.) (AP Photo/Alex Brandon, File)

Citing recent research by tax expert Martin Sullivan, Mr. Conrad said a resident of a typical Park Avenue building in New York – with average household income of $1.1 million – is paying taxes at an effective rate of about 15%. But the rate for janitors in the building hovers closer to 25%, Mr. Conrad said. “I don’t know how anybody can defend or justify that kind of tax burden,” Mr. Conrad said.

The discrepancy has been noted previously, for example by investor Warren Buffett, who often complains that his tax rate is lower than his secretary’s. The differential is largely due to the lower tax rates the government imposes on investment income, such as capital gains and dividends. Defenders of the policy say it promotes investment and thus economic efficiency to keep taxes low on capital.

But other tax breaks, such as the major itemized deductions for home interest and state and local taxes, also play a role, Mr. Conrad said, because they help the wealthy more. He’s part of a group of centrist senators that are hoping to shut down a lot of tax breaks as part of a broader deficit-reduction package. The effort also would lower overall tax rates.

Robert McIntyre, director of the left-leaning Citizens for Tax Justice, argued at the hearing that many major corporations also are paying less than they should, thanks to a variety of breaks. He contended, for example, that Exxon Mobil Corp. paid no federal income tax on its U.S. profits in 2009, and that General Electric Co.’s rate on its $26.3 billion in U.S. profits from 2006 to 2010 was “a negative 15.8%,” while its foreign tax rate on foreign profits was about 19.6%.

An Exxon Mobil spokeswoman disagreed, terming Mr. McIntyre’s characterization “completely false.” In a recent blog post, the company said its income tax expense related to 2009 activities was approximately $500 million.

A GE spokeswoman also disputed Mr. McIntyre’s testimony. “GE has not received a net income tax rebate from the U.S. for 2006-2010,” said spokeswoman Anne Eisele.

Arguments about companies’ actual tax rates are common, particularly given the hideous complexity of the U.S. system of taxing multinationals. Expect a lot more back-and-forth as the debate over reshaping the tax code develops.

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